From (1) and (2) th d F d the demand side of th economy can b written as: d id f the be itt S = I + NX

The IS curve is named as it is because it documents the relationship between Investment 3
and Saving (holding NX constant).

Demand side : the IS curveC is a function of PVLR (Y, Yf, W), tax policy, expectations, etc. I is a function of r, Af, K, and investment tax policy. policy (we will discuss this shortly) y( y) G is a function of government p NX we will model in the last lecture of the course (for the U.S., NX is small) • • • The IS curve relates Y to r. How do interest rates affect Y? As r falls, Investment increases (due to firm profit maximization behavior). p ) Also Consumption increases (substitution effect dominates) 4

IS curve is downward sloping in {r, Y} space.

IS Curve: Graphical Derivation
I curve S curve (Y=Y1) r

r

r*

r*

I,S

Y1

Y

5

IS Curve: Graphical Derivation
I curve S curve (Y=Y1) r

r

S curve (Y=Y2)

IS

r1
r2

I,S

Y1

Y2

Y

An increase in current Y leads to more desired S, S hence the equilibrium r needs to be lower! 6

IS curve

r

r*

r*

IS Y Y

Suppose r is set by the Fed at the level of r* (we will explore this in depth later in the course). For a given r, we can solve for the level of output desired by the demand side of the economy. We represent the demand side of the economy drawn in {r,Y} space as the I-S curve. Why IS? economy, {r Y} I S curve Because the demand side of the economy can be boiled down to I = S (when NX is zero) 7

The money supply is decided by the Fed and does not change with interest rates What shifts real money supply: M, P What shifts real money demand: Y, πe LM curve is named as it is because it documents the relationship between Liquidity and 10 Money

Money Market Equilibrium

Ms/P

r

Md/P = Ld(Y,πe)
M/P

11

LM Curve: Graphical Derivation

r r0

M0 /P

r r0

Ld(Y0,πe) Y0 Money Market Y

12

LM Curve: Graphical Derivation

r r0

M0 /P

r r0 Ld(Y1,πe) Ld(Y0,πe) Y0 Y1

LM(M0)

Y

Money Market

LM curve

An increase i the l l of transaction will increase the interest rate (for given money supply)! A i in h level f i ill i h i (f i l )! 13

What shifts the LM Curve
LM Curve: represents the relationship of Y and r through the money market As Y increases - Ld shifts upwards...

...theoretical considerations apply to such macroeconomic counterparts as aggregate demand and aggregate supply. The AD-AS or Aggregate Demand-Aggregate Supply model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply. It is based on the theory of John Maynard Keynes presented in his work “The General Theory of Employment, Interest, and Money”. It is one of the primary simplified representations in the modern field of macroeconomics and is used by a broad array of economists, from libertarian, monetarist supporters of laissez-faire, such as Milton Friedman to Post-Keynesian supporters of economic interventionism, such as Joan Robinson.
Brief history of demand curve and supply curve
According to Hamid S. Hosseini, the power of supply and demand was understood to some extent by several early Muslim economists, such as Ibn Taymiyyah who illustrates- “If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down”. In 1691, John Locke worked on some considerations of the consequences of the lowering of interest and the raising of the value of money. It includes an early and clear description of supply and demand and their relationship. In this description demand is rent: “The price of any commodity rises or falls by the proportion of the number of...

...CHAPTER 24
1. The LMcurve represents combinations of interest rates and income levels that result in equilibrium in the money market (money supply  money demand), for given M/P. The IS curve represents combinations of interest rates and income levels that result in equilibrium in the goods market (investment  saving), for given T and G.
2. Equilibrium must be at the ISLM intersection; only at that point does investment equal saving and the money supply equal money demand. At a point on the IS curve and to the left of the LMcurve, the money supply exceeds the demand for money. In trying to buy more bonds the interest rate is driven down, which encourages investment, increases income levels, and returns the economy to overall equilibrium.
3. When you draw these graphs, the key is to know which graph to shift. Fiscal policy implies shifts in the IS curve and monetary policy implies shifts in the LMcurve. In the case of monetary policy, draw two downward sloping IS curves, one flat and one steep. Then draw an upward sloping LMcurve through the point where they intersect one another. Shift the LMcurve to the right in a parallel fashion and note that the flat IS curve gives a higher level of output at the new equilibrium. In the case of...

...in each module. By implementing a SOA system Peachtree can use input from the doctors, both young and old, and tailor the system to meet their needs. In order for Peachtree to have the greatest success with a SOA based system, as the pros for SOA greatly outweigh the pros for a monolithic system
1. provide quickness
2. provide flexibility to go after selective standardization
3. can attempt on a limited scale or move to reduce tisk
4. cost flexible due to immature SOA market
SOA disadvantages
With a SOA based system the costs, challenges, and to some extent, benefits are largely unknown in a healthcare setting
1a couple fo years from being ready
2. immature market, no industry record
3. risk of becoming victim of ongoing learning curve
4.no one else is aggressively adopting SOA
Difficult to estimate time to achieve progress
Monotholic Advantages
A monolithic IT system would allow Peachtree to implement standard procedures across all hospitals with little risk of system failure. The monolithic approach has been implemented time and time again, therefore the costs, challenges, and benefits are known. Using a monolithic system would reduce this risk, but by locking the doctors into standardized procedures the quality of care would decrease, going against Peachtree’s business model.
1 get the job done
2.creates new consistent infrastructure
3.single set of system that unifies everything
Peachtree Healthcare can become a single institution...

...3) A demographic (2 words) (SOCIALCLASS)
4) Goods or services produced by a business (PRODUCT)
5) External Negatives (THREATS)
8) An original P (PROMOTION)
10) Buyer (CUSTOMER)
11) Marketing promotion that relies on word-of-mouth or
Online networks to spread the message (VIRAL)
17) When everyone in a market has one (SATURATION)
18) PR'E'STCOM (ECONOMY)
20) Individuals (PEOPLE)
24) Marketing using good causes (3 words)
(CAUSERELATEDMARKETING)
26) A demographic - Schooling (EDUCATION)
27) External Positives (OPPORTUNITIES)
29) Any recognizable name, logo or symbol that
identifies a product (BRAND)
33) Way to enter an international market (FRANCHISING)
35) Price starts high - goes low (SKIMMING)
41) Research designed to provide information about opinions,
attitudes and behaviours (QUALITATIVE)
42) Way to enter an international market (2 words)
(INDIRECTEXPORTING)
43) A demographic - M/F (SEX)
45) PRESTC'O'M (ORGANISATION)
46) 7th P (2 words) (PHYSICALEVIDENCE)
48) Demographic - How old are you? (AGE)
49) A demographic - What do you do for a living?
(OCCUPATION)
50) PRE'S'TCOM (SOCIAL)
51) Distribution __________. How a business gets
its products to the end (CHANNEL)
52) Surveying a small group of a population to gain
research insights (SAMPLING)
54) Paid-for communication, aimed at informing or persuading
(ADVERTISING)
55) The part of the marketing mix that focuses on where a firm’s
products are sold (PLACE)
56) P'R'ESTCOM...

...Open Economy Macroeconomics: The IS-LM-BP Model
When we open the economy to international transactions we have to take into account the effects of trade in goods and services (i.e. items in the current account) as well as trade in assets (i.e. items in the capital account). Opening the economy to international trade in goods and services means that we have to take into account the increased demand for our goods by foreigners (our exports), as well as the decreased demand for our goods that occurs because we purchase foreign goods (i.e. our imports). Total expenditures in an open economy are C + I + G + NX, where NX -- net exports -- is equal to the level of exports (X) less the level of imports (V). Thus, our exports (X) represent spending by foreigners on domestic goods so they increase the level of domestic output. Imports (V), on the other hand, represent spending by domestic residents on foreign goods, so they decrease the level of (domestic) production. To analyze the effect of exports and imports on the equilibrium level of output, it is important to understand the various factors which determine the levels of exports and imports. Exports represent foreign demand for our goods and services. Foreign purchases of goods and services depend, among other things, on foreign income levels (just as our purchases of goods and services depend on our income levels). We assume that foreign income levels are constant, thus, foreigners demand a constant amount of...

...Questions to Lecture 7 – IS-LM model and Aggregate demand
1. Draw Keynesian cross as a comparison of planned and realized expenditures. What is the intercept of planned expenditure line? What is its slope? If government expenditures would be positive function of output, how would the Keynesian cross change?
We will go over this on the review session – easier to explain than on paper.
The intersect point represents the equilibrium output.
Black line – planned expenditures
Blue line – realized expenditures
If government expenditures would be positive function of output the blue line would shift up.
2. What are the tools of fiscal policy?
Fiscal policy has 3 tools:
1. Increase or decrease government expenditures
2. Cut or increase taxes
3. Increase or decrease transfer payments
3. Explain the mechanism of government expenditures multiplier – why is the effect on the output greater than initial increase in government expenditures?
The government purchases multiplier is ∆Y/∆G
Initially, the increase in G causes an equal increase in Y, so ∆Y=∆G,
But with increasing Y will be increasing C(Y-T)
→further ↑Y
→further ↑C
→further ↑Y
So government purchases multiplier will be greater than 1, it is same principal like with
Bank’s creation of money when lending out.
4. Explain...